Observations focused on the problems of an underdeveloped country, Venezuela, with some serendipity about the world (orchids, techs, science, investments, politics) at large. A famous Venezuelan, Juan Pablo Perez Alfonzo, referred to oil as the devil's excrement. For countries, easy wealth appears indeed to be the sure path to failure. Venezuela might be a clear example of that.

Archive for January, 2008

The revolution never ceases to surprise and amaze. This week’s tidbits:

—Last
Christmas Hugo Chavez voiced his concern as a historian that Simon
Bolivar may have been killed and the bones in his tomb in Caracas may
not be his. He said he would name a commission to study this and this
week we saw the decree creating it.
You would expect forensic scientists, historians or medical doctors.
Instead, almost the whole Cabinet is in it, including the
Vice-President, the Minsiter of Interior and Justice, Foreign
Relations, Finance (Yes, Finance!), Defense, Education, Higher
Education, Health, Culture and Science and Technology. Just in case
there is a crime involved (nothing is said about the statue of
limitations) they also include the General Prosecutor.

Which
only goes to show why things don’t work in Chavez’ revolution. First of
all, most of these people are busy enough as it is, with tremendous
challenges and problems to solve to be distracted by this whim of the
amateur historian Sherlock Holmes Chavez. Even worse, it goes right to
Chavez’ apparent belief that anyone can do anything no matter the
background, including him.

—And Minister of Finance Rafael
Isea, who has been in the job for only three weeks and has yet to
announce any major decisions or plans is being promoted by the
revolutionaries of Aragua State as their next Governor for Chavez’ PSUV
party.

Just imagine, this most popular man has the task of
trying to fix the economy with limited economic experience and he is
being proposed as a candidate for Governor in elections that will take
place in less than ten months, which means he would have to resign in
about seven or eigth if he is to have a chance. Well, given the
problems in the economy, from inflation, to high interest rates to
shortages, I do hope Isea is thinking about these problems and not
politics. My feeling is that if he stays two or three months as
Minister, he has no chance to be Governor, just watch inflation and his
popularity will be inversely proportional to it.

—And how
about funny man Francisco Carrasquero, the former Head of the Electoral
Board who is now a member of the Venezuelan Supreme Court gave the
formal speech at the initiation of the judicial year. Given that
sometimes he can barely speak well, I was surprised they picked him,
but to top it all off, he said that justice can not be “apolitical” and
the Constitution can not be “rigid” or like a “stone” and that it
should not be that amendments and reforms of the Constitution serve to
protect eternal regulations. Proving once again, that Mr. Carrasquero
does ot even understand the role of the Constitution and is willing to
twist the law, like he did as President of the Electoral Board in order
to promote Chavez’ political goals. With people like him at the Supreme
Court, there can not be justice for all in Venezuela.

—Then
there is this tidbit in Tal Cual, explaining how in a country where the
“unreformed” Constitution prohibits Government financing of political
parties (Introduced in the Constitution by Chavez in 2000), the
Electoral Board (CNE) spent US$ 17.1 million in providing Chavez’ newly
created political party PSUV with 1,050 fingerprint machines, antennas
and the like in order to aid in the process of registering the members
of the new party. On top of that the CNE provided personnel, rented
tents and purchased t-shirts and caps for the new members. To finish it
off the Armed Forces provided some helicopters to support the logistics
of the process. All at taxpayers expense and illegal at that!

—But the juiciest tidbit of the week has to be that at last the National Assembly will open an investigation into Maletagate.
But the investigation will not be into looking how the money left
Venezuela with exchange controls or in a PDVSA airplane filled with
Government officials. No, the investigation will be to “prove” that
Antonini was a CIA agent, the money left the US and it is all a
conspiracy against the people of Venezuela. All is based in Jaime
Baily’s article saying he met Antonini in 2002 and at the time Antonini
claimed to be anti-Chavez. Of course, Antonini made millions since
2002, so maybe the robolution changed his mind, but I am sure the
Assembly will not look into this part of the story.

A friend sends me the
address of the home where one of the men jailed in the Maletagate case, Franklin Duran, was living in Miami before he was detained, specifically in Key Bizcayne, FL. The
address is 655 North Mashta Drive
and if you look at google maps, you find this aerial view:It looks very nice
indeed, right on the inlet, and on the water as you can see on the left and you can see on the right the dock and boat in the back of the house. If one the puts the same
address into zillow.com, then one actually gets a very nice view of the house,
pools and everything, looks like the house has two buildings and maybe even a
couple of pools:

According to zillow, the
house is estimated to be worth US$ 3.96 million and yearly property taxes alone
are US$ 75,600, what would be a huge salary by Venezuelan standards.

One can then go to theDade county webpage
and put in the address in the database for properties in the county and one
finds that the house was assessed in 2007 at US$ 4.7 million and is the
property of a company called Foxdelta Investments. In pilot-speak Fox Delta stands for FD, the initials
of Franklin Duran, but one can go to the sunbiz webpage and find that
Foxdelta investments is indeed currently owned by Franklin Duran himself as its sole
Director.

However, if one looks
at the annual reports of the company, the original company
was registered by lawyer Wladimir Abad in 2003 and in 2004, it’s
President became Franklin Duran and it’s Vice President became none other
than the carrier of the suitcase himself, Guido Alejandro Antonini, with their
addresses specified, confirming beyond any doubt that the information given to
me is correct: This is Duran’s home, not too shabby, no? Long live the robolution!

Nothing much happened with the company until August 22nd.
of last year, when two weeks after Antonini was caught with the suitcase
entering Argentina,
Duran removed his buddy Antonini from being a Director, probably as a way of
distancing himself from Antonini. Unfortunately, later he met repeatedly with
Antonini trying to help him “hide” the origin of the funds in the suitcase and
the FBI was watching and taping and he was detained for acting as an agent of a
foreign Government.

“Some with enough contacts are making a living through arbitrage. People
with credit cards who cannot afford to use their dollars from Cadivi
sell their quotas to those who can. According to Cadivi, from January
to November last year, Venezuelans spent more than $4bn (€2.7bn, £2bn)
on credit cards abroad, compared with just over $1bn the year before.
By contrast, Cadivi approved only $2.2bn for food importers, even
though the nation is battling food shortages.”

The Maletagate case gets more interesting by the minute as Moises Maionica’s guilty plea appears ready to open a can of worms for the Venezuelan Government and apparently, the Argentinean one will not be that far behind.

First of all, Maionica must have a lot of interesting and significant information as he has been offered an S visa in exchange for his guilty plea. I confess I had never heard of such a visa, but from its description, it must not be used unless the witness can provide extremely useful and interesting information for the US Government on the case. Thus, Maionica must have offered a wealth of interesting stuff, given that now he will be unable to return to hi home country. And one has to wonder whether the others accused in the case will soon follow Maionica’s steps. According to the immigration website:

“The
S visa issued to persons who assist US law enforcement to investigate
and prosecute crimes and terrorist activities such as money laundering
and organized crime.”

On top of it, the US Attorney General has to approve it.

Reportedly, the Prosecutor in the case has not revealed all his cards and may have recordings between some of those indicted and the Argentinean Consulate in Miami, which can only create more problems to both Governments as the recording will be made public some point and the total denial they have so far used may become a laughing stock. Additionally, Guido Antonini, who carried the suitcase with the US$ 800,000 into Argentina is ready to testify on his meetings with some of the same members of the Argentinean Consulate caught on tape talking to the other defendants on the case.

Finally, the Venezuelan Government has made many denials, but has yet to say anything about the man at large, Canchica, who is reportedly and active military officer and member of the intelligence police, but nobody has been able to locate , amidst rumors he is in Cuba.

While Chavez continued saber rattling Colombia, his former Minister of
Defense Raul Baduel sent a message to that country not to pay attention to
what Hugo Chavez may say. It was a remarkable statement from Chavez’ former
buddy, but one had to see beyond the message itself.

More than
talking to the Colombians, Baduel was likely sending also a message to the
Venezuelan military, the same military officers that had to exert pressure
on Dec. 2nd. to have Chavez accept his defeat in the Constitutional
referendum, to not pay attention to their own Commander in Chief’s attempt
to distract the attention of the people form the mess Chavez has
created.

And one hears daily the rumblings not only from the people,
but more and more from his own collaborators and remarkably, from Hugo
Chavez himself. In the middle of his threats against Colombia, Chavez now
regularly sprinkles his speeches with rants and loud statements about his
Governments inability to accomplish anything, as if he were not the Chief
of State but some sort of outside comptroller checking things
out.

What is remarkable and somewhat worrisome is the speed at which
the results of the December 2nd. referendum have unraveled the Chavez
Government. Chavez’ popularity is sharply down as the image of invnecibility
he had is now gone. But more importantly, there is no longer the fear of
speaking out or of being discriminated for speaking out. In fact, unlikely
other electoral processes, there has been no punishment or even threats
against those that did not vote and the former Chavez supporters that voted
No in December have not felt any indication that anyone knows their
vote.

The fact is the loss was so unexpected that Chavismo is still
trying to come to terms with it so it has not had the time to organize any
action against the voters, because it is more concerned about whether the
Government’s popularity can be brought back to its former levels. Moreover,
many of the fanatics who organized the discrimination campaigns in the past
are no longer around, they actually voted No.

And as they try to do
prop up Chavez, they find that events are unraveling at their own speed
with shortages widespread and the monetary reconversion creating another
spike in inflation, creating a very negative atmosphere against the
Government. In fact, polls continue to show a drop in the Government’s
popularity, beyond what was expected initially from the December
defeat.

And the question is how can truly the Government raise its
popularity? Chavez continues to shoot from the hip daily. Sometimes
at Colombia, other he says he will raise food prices, the next day he says
he will finance food purchases at Mercal. But the truth is that between the
gas subsidy, the food subsidy and the mismanagement, the Government
voracity has bn such that little has been accomplished and now desperate
measures with possible falling oil prices are unlikely to yield any quick
results. And with the economy strained by the bad policies of the last few
years, any new policies are likely to slowdown, not move the economy,
creating further backlash.

And I begin to get concerned at the speed
at which things are unraveling for the autocrat. I hope Hugo Chavez is in
charge to witness the effects of all of the mismanagement of the last few
years. I hope he rides his unpopularity to the lowest possible lows and is
blamed for nine lost years of progress, as he has essentially damaged the
Venezuelan economy through incompetence, fanaticism and ignorance. I want him
to be alone as his buddies defect one by one, money in their suitcases,
leaving him ranting into empty spaces day after day.

Only then,
should he be allowed to leave and face the courts for his mismanagement,
corruption and human rights violations.

Moises Maionica one of the men charged in the US with being an agent of the
Venezuelan Government in US territory in the Maletagate scandal, changed his
plea to guilty in a sign that he is now coopertaing with US authorities.
Immediately the Venezuelan Foreign Minister said Maionica was lying through
his teeth in declaring himself guilty. Maionica was facing 15 years in jail
if found guilty after declaring himself innocent, but has probably changed
his plea now in exchange for immunity and reportedly, a US visa.

Maionica’s plea change clearly indicates that Maionica is telling his stry
and exchanging information. This could mean bad news for the Venezuelan
Government not only in the Maletagate case, but also Maionica was the legal
representative of the fingerprint machines used in the 2004 referendum and
reportedly held property in his name, which belonged to former CNE President
Jorge Roridguez, who was later named Vice President of Venezuela and
currently is President of Chavez’ political party PSUV.

In the last few days it has become known that the FBI had more tapes, videos
and information that previously revealed, including SMS messages exchanged
by teh accused with Venezuela, which prove their involvement. Most analysts
expect others accused in the case to change their plea now that Maionica,
considered to be the one with the contacts at the highest levels of the
Venezuelan Government, has begun singing.

Many people in Caracas must be feeling their feet trembling and it is not
precisely an earthquake.

As we learn today that “hard core” Chavistas are outnumbered for the first time by “hard core” opposition to Chavismo for the first time in nine years (25% to 22%) and that Chavez overall approval rating has fallen to 35%, it is perhaps appropriate to reproduce this article by Alvaro Vargas Llosa. Somebody should tell Chavez: “It’s the economy, stupid”

CARACAS, Venezuela–After an extensive visit to the
slums of this capital, I am convinced that Venezuelan President Hugo
Chavez lost the recent referendum that would have extended the time he
could remain in office not because his countrymen value democracy so
much, but because his social programs are crumbling. In the barrios of
Petare, Catia, Baruta and other places, the nationalist/populist model
is collapsing.

Through a network of
“missions,” the government has been using oil revenue to provide food,
housing, cars, education and health care for millions of Venezuelans.
In theory, Venezuelans are enjoying the “social justice” denied to them
during decades of rule by the country’s elites. In real life, the
missions are plagued with corruption and inefficiency, and are severely
hampered by the insecurity and the shortages that have become the
hallmark of Venezuelan society.

The Barrio
Adentro mission was originally run by about 30,000 Cuban doctors and
medics. Many of those health centers are now closed; the rest are
seriously understaffed. “The Cubans are leaving,” explains Felix, a
social worker from Baruta, “because they don’t get paid, because they
are the victims of rampant crime or simply because they have moved
on–they only offered to serve in Venezuela as an excuse to get out of
Cuba.” In some cases, the government never provided the funds needed to
finish the construction of clinics. In Baruta, a desolate construction
site reminds the local neighborhood that there is, as Felix puts it, “a
gulf separating reality from speeches.” I was not surprised to learn
that, according to Andres Bello University, 60 percent of the Barrio
Adentro health centers are not functioning.

The
Mercal mission, a series of supermarkets in which the poor can
theoretically acquire food at extremely low prices, is not faring any
better. Because of price controls, essential products are missing from
the shelves. People stand in line for hours to buy food or milk. In
some cases, as I was told in Petare, producers have been put off by
price controls; in others, the people who manage the supermarkets sell
essential products under the table to those able to pay more.

The
soup kitchens, which supposedly have to serve free meals to 150
Venezuelans in each neighborhood every day, are also falling victim to
the chronic shortages. Jesus, a Chavez supporter who manages a soup
kitchen in Barrio Union Petare, told me that he would not be serving
his neighbors until next week, when he expects to get new provisions.
The result? “The squalid ones,” he concluded, using the term with which
Chavez refers to his critics, “are now a majority around here.”

Corruption
has eroded the prestige of the Habitat mission through which the
government supposedly dishes out checks to poor Venezuelans so they can
buy a house. It is not unusual for an aspiring homeowner to find out
that a mystery person has cashed the check using his or her name. “The
same people who hand out the checks cash them for the benefit of their
relatives,” explains Eladio, who told me a nephew recently suffered
such an experience.

The decision to make cars available to millions
of Venezuelans has meant that Caracas is now a traffic inferno. “The
money I spend on gas in one day in the United States will allow me to
drive for an entire month down here,” says Virginia, a television
producer who goes back and forth between Caracas and New York, and
spends a good part of her day when in Caracas driving from one place to
another. “What use is it for millions of people to have cars if they
are wasting much of their lives paralyzed in traffic jams?”

The
Sucre mission, which helps adults complete their secondary education,
is also creating problems. The beneficiaries tend to go to
government-controlled universities that require few qualifications.
Therefore, numerous professions are overcrowded and Venezuelans
complain of not being able to get a job despite their credentials.
Together with a 30 percent annual rate of inflation, the closing down
of thousands of businesses because of socialist regulations, land
confiscations and nationalizations have crippled the country’s
productive capacity–and therefore the demand for workers.

“The
government led Venezuelans to believe that they could become a consumer
society without producing anything,” says Luis Ugalde, the president of
Andres Bello University, “and the results are now speaking for
themselves.”

When I asked Beatriz, a social
worker who spends her time in Catia, to talk to me about Chavez’s
missions, she responded, “One cannot speak about that which doesn’t
exist.” That strikes me as an appropriate way to sum up Venezuela’s
nationalist/populist model.

Today, the Venezuelan Electoral Board (CNE) rejected the possibility of holding a referendum on an Amnesty Bill as requested by a group of citizens. This may represent a new all time high in terms of injustice for the revolution, as the arguments used by the CNE are simply absurd and have no legal grounds. The CNE simply makes a fake legal argument to reach its decision that makes a mockery not only of the Venezuelan legal system, but of the much ballyhooded “representative” democracy that autocrat Chavez claims to believe in.

The argument represents the pinnacle of circularity in groundless legal arguments. Let’s review the details:

“Article 205. The discussion of Bills presented by citizens according to the previous article, will be initiated at the latest in the period of ordinary sessions following that in which it is presented. If the debate is not initiated during that period, the project will be submitted to referendum following the law”

This simply means that the Assembly has to bring up to debate a Bill before the next period of sessions or it just goes to referendum.

Remember, this is the Constitution, the Bolivarian Constitution of Venezuela, approved and proposed by Chavismo in 2000.

Well, it just so happens that a group of citizens proposed an Amnesty Bill almost two years ago and the Bill was never debated or considered by the 100% pro-Chavez National Assembly. Thus, it is very clear, the Bill as proposed, a much wider Amnesty Bill than the selective non-Amnesty approved by Chavez when his hostage rescue failed on New Year’s, has to go to referendum, no question about it, it happens to be the Constitution. Thus, the same citizens went to the Electoral Board and asked that it be held.

One of the members of that Board had already expressed publicly that the CNE had nothing to consider with that referendum, a surprising statement given that the CNE has tried to get involved with any election going on in Venezuela, except with that of my condo board.

So, today the CNE ruled with an incredibly absurd and typical miscarriage of justice that the CNE has accustomed us to.

The argument goes something like this:

Articulo 187 of the Venezuelan Constitution says that it is the competence of the Venezuelan National Assembly to decree amnesty.

So, you may ask, how did Chavez decree Amnesty?

Well, that’s the interesting thing, he did it illegally. He argued that the Enabling Bill gave him power to do. But if you inspect that Bill carefully, nothing in it even comes close to Enabling Chavez to decree Amnesty. Read it, if you don’t fall sleep you will notice that not even distant relatives of the concept of Amnesty are contemplated in it.

So, what did the CNE argue:

That the National Assembly was not constitutionally obligated to discuss the Bill because this had been delegated on the President by the Enabling Bill. Thus, they argued, it became “evident” that Art. 205 of the Venezuelan Constitution did not apply.

So, it is an extremely circular miscarriage of justice by which, the CNE, not preciselt your Venezuelan Supreme Court is ruling:

1) A decision by the National Assembly is above a Constitutional mandate and article.2) That decision is not even “evident” in the Bill that supposedly allows the President to approve Amnesty, by which supposedly the Assembly delegated its Constitutional mandate on the President (Secretly?)3) The CNE takes away a right of the “people” by this simple act which appears nowhere in the Enabling Bill.

Thus, Chavez’ Amnesty, which I believe is illegal, because it’s not even mentioned in the Enabling Bill, precludes the people from proposing their own, showing once again that revolutionary justice is not only circular, but very autocratic.

If human beings learn from their mistakes, you would think that by now Chavez and his buddies would have learned something about what works and what does not work in terms of economic policies. It is getting to be quite tragic that the more shortages become widespread, the more the “solutions” are borrowed from the same recipes that have failed Hugo Chavez in his last nine years of Government.

First, there is this infinite belief that the Government “can do”. Unfortunately, so far in nine years, all of the Government’s commercial projects have failed miserably. Remember the sugar revolution that was coming to Venezuela under the advise of the Cubans? When it was announced in 2001, we were told that by 2005 Venezuela would have become a net exporter of sugar. Instead, the programs have been mired in delays and corruption and it is early 2008, three years late, and none of the sugar processing plants promised, funded and started in 2001 are fully functional.

Even if they were, there would be a problem. Those that were supposed to grow the sugar cane are either gone or growing something else, either out of frustration over the delays or because the sugar cane plantations that were productive, were invaded, confiscated or abandoned by the policies of the revolutionary Government.

But they don’t ask: Do any of our commercial intiatives even work? The answer may be too painfull.

Second came the controls. Much like any Government official in any part of the world, ignorant in economic principles, the Venezuelan Government decided five years ago to freeze the prices on more than 400 products, many of which can’t now be found around, as producers simply shift to non regulated crops or stop working the land. What’s the point if you lose money? It’s called motivation, survival of the fittest, simple logic.

But instead of accepting the failure of the price controls, the solution is to continue the controls and threaten the producers like in the case of milk. The first threat, is that the Government will expropriate your farm if you export to Colombia. Thus, the autocrat can export the money of all Venezuelans at will, giving it away when it is actually needed right here, but local producers can’t try to sell their products with a gain in Colombia, because the same person fails to agree with that whim. Maybe Chavez fails to realize that he lost the referendum and economic freedoms are still in the Bolivarian Constitution.

Even worse, Chavez also threatens those that produce cheese with their milk. You see, most cheeses have no price controls (some do, curiously those are exactly the ones that are hard to find) and liquid milk is regulated, so producers, following the laws of economics, prefer to produce cheese and make a profit than sell milk and lose. Clear choice, right? Not for Chavez and the revolution.

What’s next, a decree prohibiting the production of cheese? For the people, shortages of milk or cheese are not too different, they have never had shortages like this in the terrible forty years of the IVth. Repubic and maybe Chavez has forgotten how common it is to have an arepa with cheese in the morning. It actually sells more than hamburgers in Venezuela, in case you were wondering.

Third, when you realize things are not working, start importing food yourself (back to the first mistake) and distributing it, but, here is the clincher, at the official rate of exchange. Thus, while local producers have had to face 80-100% inflation in the last four years, your imports are still at Bs. 2.15 per US$, essentially driving local producers out of business. Throw in more labor legislation and higher labor costs just for fun.

Fourth, when nothing seems to work shoratges the rule of the day and inflation out of control, make your policies even worse. Given your recipe for assuring the destruction of your own production system, when this happens, then decide like they did yesterday to:

—Remove all taxes for the importation of foodstuffs. Locals still have to pay taxes, VAT and financial transaction tax included.

—Allow anyone, to import as much food as they want without payng taxes at the official rate of exchange of Bs. 2.15 per US$. The theory is you will lower prices, promote imports and there will be plenty for everyone. Nobody asks where the money will come from or what happens to the local producer who by now is close to bankrupt. I guess it does not matter, if he tries to make a profit or export it, we will intervene them anyway.

—Have PDVSA become a food producer. Given that the company is a farce, that production is down, management is corrupt and second class, work accidents up, the given them another responsibility so they can screw up something else and distract the company from its true purpose. Of course, blame the “hoarding, contraband and the illegal trade of products” for the problems, not your stupid economic policies or you inability to stop contraband or persecute hoarding you have “only” been in power for nine long years after all.

Thus, the recipe for disaster that has caused the shortages and the inflation, as I have been warning about for over two years, rather than being discarded or analyzed critically, is overhauled to add steroids and amphetamines to it, to insure things get worse, not better. It is sort of the world backwards, as if they were asking what does economic theory and history say, to do exactly the opposite.

And when things get even worse, they will analyze the recipe again, blame everyone but the Government for their problems and start again.